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As we are seeing here http://www.theoptionsguide.com/strike-price.aspx

  1. Relationship between Strike Price & Call Option Price
  2. Relationship between Strike Price & Put Option Price

I do not understand these two things. Can anyone help me to understand this.

Thanks,

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  • $\begingroup$ It is not surprise to see downvote. But it is surprise to see downvote with out any comment. :) $\endgroup$ – backtrack May 19 '15 at 13:23
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    $\begingroup$ I didn't vote but I believe the reason to be that this question is not on-topic here as described in the faq. $\endgroup$ – Bob Jansen May 19 '15 at 14:49
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Option pricing is all about intrinsic value and time value. The intrinsic value is the difference between the strike price and the underlying market price.

  1. A call is a right to buy the underlying. Therefore intrinsic value of a call is positive when the strike price is below the underlying market price. You can buy for less than the market offer.

  2. A put is the right to sell the underlying. Therefore intrinsic value of a put option is positive when the strike price is above the underlying market price. You can sell for more than the market bid.

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